Previously we have looked into the possible effect of China's Two-Child policy on its real estate market. It is believed that that encouraging families to have two children will encourage them to prefer bigger homes, thus developers in turn would also make bigger houses. In another sense, this policy is believed to increase the demand for housing real estate.
But will the said policy really stimulate the residential real estate in China? According to the South China Morning Post the National Health and Family Planning Commission has projected an extra 5-6 million babies yearly with the two-child policy in place. This would result to a bigger population in the future, therefore, a bigger population would mean increased demand in living space.
With the high living standard and compressed space in prime cities the majority of the future second children will be encouraged to move in other cities as they try to start a live for themselves. This movements is expected to result into the urbanization of the small towns they have distributed themselves into and therefore, with urbanization demand for properties will increase, mobilizing the property market in non-prime locations.
With these scenarios expected, it was projected that the two tier policy might work for low-tier cities instead of those like Shanghai, Beijing and Shenzhen where costs of living are well above average. And knowing that the developers would have initially come up with plans for housing that will cater to the what those in low-tier locations can afford. Developers should be looking into a price efficient layout that to begin with must have anything between 3-4 bedrooms instead of the previous 2-3 bedrooms.
If all goes well as projecting, China could be looking into a future housing boom. But as previously reported, analysts are concerned that birth numbers might not increase as expected as what has been seen in Beijing after the two child policy was eased in 2013
